Ellona Bateman-Lee is in trouble. With barely enough money to cover living expenses, she is having trouble coping with soaring food prices, utility bills and health-care costs. In desperation, she is turning to online flea markets as a last-ditch grasp at solvency.

Does the fact that the online garage sale industry is booming say something larger about the state of the nation?

Now devoid of amenities most Americans take for granted—television, vcr, dvd player, stereo, etc.—it is not clear how much more Ellona can put up for sale. Are you reaching the end of the line when you sell your grandmother’s bequeathed teakettle on eBay for $6?

Struggling with billowing debt and rising prices, faced with a rapidly deteriorating economy and job market, cash-strapped Americans are selling family heirlooms, prized possessions, scrap, and just about anything with value.

Internet garage sale sites are booming. According to the Associated Press, Craigslist, one of the more well-known online flea markets, has seen the number of for-sale listings soar 70 percent since last July. AuctionPal.com says its sales rose a blistering 66 percent from February to March.

Pawnshops too are seeing higher numbers of clients. “People are cleaning out their houses of gold, silver, whatever, to get money just to fill their cars with gas,” says Nat Leonard, a pawnshop owner in Philadelphia. “People are pawning out like crazy.”

Leonard’s sales volumes are up 20 percent over last year, with increasing numbers of first-time customers. “I’ve got business owners coming in to pawn things just to make their payrolls,” Leonard said. “I’ve never seen that before.”

“With this economy, we’re not done yet with bad times,” he said. “Not even close.”

Secondhand online merchandise is already selling for 25 to 35 percent below last year’s prices, says Brian Riley, senior analyst at the TowerGroup research firm. If the numbers of people trying to dump their stuff continues, prices will probably continue to fall.

Over the last several years, the ability of U.S. consumers to continually ramp up spending, even as real wages have stagnated, has amazed many. But if the buying binge is finally reaching an end, there will be serious ramifications for the economy.

A whole swath of factors are ailing consumers.

Home prices are falling, therefore the number of people who can borrow against the value of their homes to make purchases is declining. And those who have borrowed in the past now have to use a greater proportion of their disposable income to pay the money back.

Sagging home prices and soaring mortgage delinquency rates are also burning banking institutions’ balance sheets—meaning banks are now much less reluctant to lend money or originate new mortgages. But because of falling home prices, many prospective homeowners are remaining on the sidelines anyway.

This means fewer big-ticket items like homes are being bought or sold. Consequently, the real-estate industry is drying up, new construction is slowing, and jobs are being shed. Trickle-down effects are beginning to be felt at home-supply centers.

Prices of many essentials are rising. Food and energy costs are certainly soaring. Budgets are getting hammered, and $3.50 per gallon fuel is chipping away at what is left of discretionary spending.

Meanwhile, wages have hardly budged. Worse, if the U.S. Bureau of Labor and Statistics calculated inflation the way it used to, back in pre-Clinton times, real wages have probably fallen over the past several years.

And it is no wonder wages are stagnating. Employers have shed jobs quicker than most realize. In each of the past four months, an average of 65,000 jobs were lost. That average includes April, in which the government said only 20,000 jobs were lost.

As bad as 20,000 or 65,000 lost jobs may seem, a look at the actual data reveals an even uglier picture.

The government uses something called the birth/death model to adjust the number of jobs it says the economy created. These are not jobs that can actually be identified or pointed to; they are small business jobs that the Labor Department says are missed by its surveys. So the Labor Department adds how many jobs it thinks were actually created or lost. In normal conditions its estimates can be close, but when the economy reverses directions, like it has now, the birth/death model can be deadly wrong.

To show how flawed this model can be, in April, the birth/death ratio added 267,000 jobs to the total number of jobs supposedly created in the month. That was more than the same month last year, despite the fact that both the housing and banking industries have self-destructed in the meantime.

As economist John Mauldin points out, the birth/death model added 45,000 construction jobs to the total, even though the actual survey identified a total loss of 61,000 from known companies. The net result is that only 16,000 construction jobs were officially lost. Similarly, the birth/death model added 8,000 phantom jobs to the finance sector and 83,000 to the hospitality sector. The banking sector is going through one of its biggest upheavals in decades. Does anyone actually think that jobs were added in this industry’s smaller firms when the biggest banks are laying off thousands?

“Without that addition from the birth/death number, total private employment would have dropped by 296,000,” says Mauldin. “[W]hen the final revisions are in, we shall see that job losses were well south of 100,000.”

Federal Reserve interest rate cuts are also causing damage. Lower interest rates tend to undermine the value of the dollar. A weak dollar means the prices of imported goods like oil, clothing, electronics and food all rise. Since the United States is so reliant on imports for many of its daily needs, price inflation is hammering spending and consumers’ pocketbooks.

What does this all mean?

Booming online and offline garage sales and pawn shop inventories suggest that the economic downturn is just getting started. What’s the first thing people do when faced with financial stress? Sell what you don’t need. But that is just the first stage.

So you pawn your dvd player for gas money. How far will $5 or $10 get you? Literally, about 30 to 60 miles. When that’s gone after two days of commuting, what then? Sell your car? Downsize your house—in this market?

Americans are facing tough choices. But it is going to get tougher before it gets better. Seventy percent of the economy (as measured by gdp) is consumer spending. If consumers slow down, so will the economy. It’s a virtual guarantee.

There is coming a time when the consumer will be tapped out, and the debt-fueled consumption binge will end. When it does, consumer confidence will be replaced with fear and eventually panic. This panic will result in increased asset sales and reduced spending as workers attempt to pay off their debts (or save their homes). Evaporating confidence will cause consumers to rethink current and future spending plans. The economy, hit with a lack of demand, will slow, corporate earnings will fall, stock markets will plummet, and layoffs will become prevalent. As more people enter the unemployment line, the deflationary spiral will intensify.

If that happens, the resulting economic instability will lead to a vicious cycle of consumer spending cutbacks, a plummeting economy and soaring unemployment. Home prices, along with many other domestic-demand-driven assets, will be sucked into a deflationary spiral, likely stimulating a banking crisis as thousands of bad loans must be written off. Yet simultaneously, import prices will soar as the federal government continues to inflate and spend money in a vain attempt to stimulate the economy and keep paying promised Social Security and Medicare liabilities. The dollar will fall further as boatloads of rapidly depreciating greenbacks wash up on America’s shores as America’s foreign debt holders try to spend their U.S. dollars before they become worthless. And as is the case during economic crashes, the middle class almost always gets hurt the worst.

And where will these events leave the majority of Americans? Without a job, without a home, with little or no money (what little savings Americans do have will be destroyed by inflation), coping with food shortages and skyrocketing food and heating prices.

Sound a little too apocalyptic? The fact is, it doesn’t matter what any one of us may think: The storm is coming.

Over the past century, Americans have become more rich and increased with goods than any other nation in the world. Many still think they have need of nothing. Unfortunately, most don’t realize that these riches are illusionary. The dollar is fiat and could collapse overnight. At the same time, goods often aren’t even paid for in “real” dollars; they’re bought on credit.

U.S. private household debt is now almost $14 trillion. Add in federal, state and local debt, plus unfunded government liabilities such as pensions, social security and Medicare, and the national debt load may exceed $75 trillion.